What is DeFi yield and how does it work

"5-15% APY in DeFi" sounds like magic. It isn't. These rates have concrete sources. Once you understand them, you can assess risk much better.

1. Lending (Aave, Compound, Morpho)

You deposit USDC into the protocol. Another user borrows your USDC against BTC/ETH collateral. They pay borrow APR, you get supply APY (slightly less — protocol fee).

Rate is floating: depends on utilization (% of pool used). When borrowing surges, APY rises.

Risk: smart contract (bug = funds gone), rarely bad debt during liquidations.

2. AMM pools (Curve, Uniswap, Balancer)

You provide two tokens, e.g. ETH and USDC. Traders swap through the pool, paying a fee. That fee is your yield.

The catch — Impermanent Loss (IL): if ETH moons, you end up with less ETH and more USDC. Your USD value may be less than if you'd just held. That's why stable-stable pools are safer.

3. Liquid Staking (Lido, EtherFi, Jito)

You deposit ETH, get stETH (or JitoSOL on Solana). These tokens slowly appreciate via staking rewards. You can use stETH in other protocols — that's restaking.

Risk: smart contract + validator slashing (rare) + temporary stETH depeg.

4. Protocol-token rewards

A protocol wants to attract TVL — it emits its own token. You see "12% APY" — but it's 5% real + 7% in protocol token. If the token drops, real yield drops.

These "emissions" are a subsidy. Usually temporary.

How to read DeFi tables

1. Look at base APY vs reward APY — base is real, rewards are in tokens.
2. Compare current APY to the 30d average — big gap = volatile.
3. Mind the pool TVL — low TVL = slippage and rug risk.
4. IL risk — yes/no — determines your strategy.

Compare 500+ DeFi pool rates — on the YieldScope main page.